Problem and Solution
Tellus sees “the problem” as the most basic one. Why can’t people pay for their housing, food, and basic necessities if they work +40 hours a week?
The crypto market has always struggled to find adoption for the everyday user. We understand that cryptocurrency has gathered a lot of attention thanks to its potential to become a new store of value with the full benefits of a decentralized and trustless process. But in Tellus, we understand that the real value of cryptocurrency relies on connecting everyday people with everyday services. We see the possibility of creating a new parallel market of goods and services, where users can find a smooth transition into the Stellar ecosystem by participating in the economy as they have always done.
A functionalist economy presents a social model of production where resources are distributed among individuals with the power to exercise their ownership in the market. This creates an unfortunate situation where the workforce struggles to find opportunities to make their resources grow and make ends meet. We see Stellar as an opportunity to create a safety net utilizing the current capital flow within service to merchant applications. Our scope includes finding services with a clear intention to boost small business economy and renewable energy accesibility.
A great deal of the population is opting to participate in the gig economy - this being, work with flexible schedules, and usually there is an easy point of entry for the uneducated or inexperienced. Unfortunately, many these new services have become a proxy for exploitation for small businesses and workers alike. Legislation and bureaucracy make it tremendously difficult to find clear definitions on the responsibilities of these service providers. So benefits, health insurance, or a living wage are usually left behind to achieve profitability and maximizing productivity. This is major gap to bridge for unprotected workers and presents an opportunity to incorporate cryptocurrencies not as a method of payment, but as a bridge between the known and the unknown.
Tellus wants to provide workers and small businesses working for customer-driven app services with a seamless transition to the DeFI space. We want to utilize the current flow of fiat assets within these service applications and provide with a fork to transform fiat to anchored assets automatically. The end user of the service would benefit from saving a small percentage of their earnings into a mutual fund gathering liquidity in the stablecoin version of their local currency. This anchored assets will serve as a democratic pathway to business/worker cooperation while participating in trustless collective tip pools.
In Chile alone we have observed more than 73,000 companies in debt since January 2020, a dramatic increase since the Covid-19 Pandemic started. We have followed the trends related to small businesses losing their independent status, having to rely on loans and third parties to stay afloat, and we have concluded that the economic cycles resulting from our economic system heavily affect the profitability and inclusion of locally owned businesses. Followed by prosperity, society always finds itself in a down cycle. The economy suffers from the negative externalities of boundless production, resulting in inflation, pollution, gentrification, and unemployment. This is a well known story where the most affected are always the underpriviledged. The pandemic is a shocking example of this issue in practice. We see that we are simply not prepared to deal with times of great economic distress. What would happens if we use these new services that try to provide new job opportunities, like food delivery drivers, mini-markets (or bodegas), customer service workers, local farmers, servers, transportation drivers, freelancers, and everyday people to create a bridge between the economy we all know and the economy that is about to come? Stellar has the toolset to bridge the gap between banking and virtual currency thanks to their anchors, turing complete signing servers, and democratic decision making built into their consensus protocol. Tellus believes that this is the perfect opportunity to provide the tools to everyday people to make the transition to a virtual economy.
Retirement and pension plans take a percentage of our well earned money and pools it in different funds with different set of rules. In Chile, these funds are subject to massive losses due to market fluctiation, being one the most controversial topics in South America. There has been observed up to -34% of losses from these retirement plans since the 2019 pandemic started. It is important to mention as well, how this money exists as a number in a computer, but workers don’t have real control over these assets. If we were to create an alternative to these pension plans, where workers, small business owners, and retail investors alike would be able to pool the resources without the need of a third party, we could create a safety net independent from fiat market fluctuations. This money would be fully accesible to the owning parties at every time using built-in multi-signature capabilities and adding an extra layer of democratic decision power between all the parties involved. We see this vision as the next step forward for an independent economy. Where conglomerates of small businesses and workers have the power to decide how to invest, spend, loan, or borrow money within the same service to merchant ecosystem.
A great case study in Chile is the “Estallido Social” in Chile, - which roughly translates to “Social Explosion”. People were fed up. Income inequality is prevalent in Chile since and before the dictatorship days. Public natural resources such as potable water, minerals ores like copper and lithium, and national parks are all private, and people felt the need to express their discontent. This massive wave of protesting, greatly affected the fiat economy, millions of dollars were lost in public infrastructure, exports, worker compensation, and public funds. Interestingly enough, the cryptocurrency market grew almost 35% - as it was reported by the internationally established cryptocurrency market, SatoshiTango. It is obvious that people are continuously losing faith in the status quo. Salaries don’t meet the needs of everyday survival. Tellus believes there is an easy pathway towars decentralized finance and it relies on using the already created anchor infrastructure to streamline institutional liquidity providers. Simply put, we cannot expect that the retail investor to find their way to the crypto space. The entry barrier is present, new technologies present new challenges to understanding, and the concept of blockchain is still difficult to grasp for many. Every cent counts, and investing in crypto is seen as a risky business. When money is tight people looks to put their money is something safe - more accurately in something they understand. If we incorporate a crypto gateway in already existent services, we will find ourselves creating a massive adoption wave out of everyday resources. We believe that approaching adoption by incorporating cryptocurrency payment methods is highly inneficient, as you need to ensure the end user gets real utility out of purchasing crypto assets. So we must ensure the end user has no barrier of entry to adquire crypto. We can create a system of participative democracy, where workers and consumers have decision power over conglomerates of local businesses living in a service to merchan ecosystem. This way, small businesses have the power to collectevily become their own financial entities, providing liquidity for virtual versions of their local currency as well as being rewarded for their participation with a utility token.
Our target market is Merchant Service Providers (MSP) and their users. Our API will be incorporated in MSPs' aplications, yet the real beneficiaries of our products will be their users. However, Merchant Service Providers are the pathway to incorporate our Vision, playing a fundamental role in the Cooperative. Tellus's model needs the umbrella of services that an MSP can provide, this way promoting adoptiong through established banking rails.
We have performed a user persona analysis to evaluate what our end user's will get our of our protocol. To classify their socioeconomic status, we have based our analysis on Chilean economic indicators.
E - Individual earnings up to 350,000 CLP a month
D - Individual earnings up to 570,000 CLP a month
C3 - Individual earnings up to 900,000 CLP a month
C2 - Individual earnings up to 1,400,000 CLP a month
C1b - Individual earnings up to 1,900,000 CLP a month
C1a - Individual earnings up to 2,800,000 CLP a month
AB - Individual earnings up to 6,500,000 CLP a month
Tellus Cooperative intends to be provde a safety net and a new avenue for growth for those who cooperate and participate in the network, regardless of their income strata or socioeconomical status. The end user will generate a profit by carrying out their daily activities, such as buying food online, getting a ride to work, or their groceries delivered. In the following analysis, we will observe 3 actors that will benefit from Tellus.
Tellus will charge a percentage based on the sales performed by Merchant Services Providers (MSP). This percentage will be streamlined on-off rails using Anchor functionalities and then given back in the form of anchored assets. All these assets generated by merchants will be deposited in a tip pool and generate liquidity on local anchors. This way providing decentralized protocol of savings by leveraging bank-backed cryptocurrencies.
We expect that the percentage to leverage in the protocol mimics the Merchant Service Provider fees - which averages between 2 - 3 %. Based on previous years, we calculated that Uber (a predominant rideshare company) had earnings of $11.130 Million USD and Mercadolibre (a well known marketplace in SouthAmerica) $3,973 million USD
Considering this, Tellus aspires that after 3 years of steady operations with one of these providers, we could create a decentralized market of small businesses and/or workers amassing more than $3 million USD in South America alone.
This does not include the speculative pricing of our token which could greatly increase the amount of money generated for individual participants in the network. However, we yet to determine the supply and general tokenemics of Tellus' Token. We are well aware that there are many influencing factors attached to the valuation of token. Henceforth, we will open the discussion for Stellar Community Members and blockchain enthusiasts to help us make this decision.
In Chile, we find a classic division of power established by the 1980 constitution, where the functions of each are divided between the Constitutional Court, Central Bank, National Council on Security, among others. The government is a Presidential Republic, where the president of the republic acts as head of state as well as head of government. Consequently, this authority has many faculties like, exclusive initiative in law matters, the power to call for estates of constitutional exceptions, the possibility to dictate decrees with the force of law (delegated previously from the congress), convening of plebiscites, and naturally, the naming of ministry and cabinet members.
Chile exercises a government system within democracy and benefits from governmental stability. This has given Chile a privileged position in the Latin American region, where they can ensure a safe environment for international business practices. This is fundamental for Tellus Cooperative, as it grants us the ability to interoperate with national entities and international ones alike. Today, Chile is changing. After a nationwide vote, Chileans have chosen to create a constitutional assembly aiming to fix outdated practices and policies. This is a latent opportunity to incorporate new financial-technology avenues to solve some of the issues the country faces. A new environment for legislative amendments is already instated, and Tellus finds itself privileged position within this environment. Countries like South Korea, Denmark, and Sweden are pioneering the adoption of digital money. We believe Chile has the perfect political climate to push this type of adoption.
Following, we analyze the economic environment in Chile and their main macroeconomic indicators, their growth expectations, and the different indexes for measuring financial inclusion in the national economy provided by the Central Bank.
The Monthly Economic Activity Index (IMACEC) is an estimation that summarizes various economic sectors' activities in a given month based on the prices of its concurrent month; their year-on-year variation consists in an approximation of the changes on the PIB (GDP - Gross Domestic Product) last year.
The IMACEC is published the first business day of every month with a length of 31 days. In addition to the IMACEC, they publish the a distinction between the activities performed, specifying if the IMACEC is related to mining activities or not, and an IMACEC Series based on cost analysis. Each series is presented in original numbers, as well as adjusted by season. These are reviewed at the national level by trimester and annually.
Based on the previous information, we know that the IMACEC in June 2021 grew 20.1% compared to last year (fig 1). The seasonally adjusted series grew 2.1% compared to the precedent month and 20.4% in 12 months. The month had one less business day compared to June 2020.
All components of IMACEC grew compared to the same period last year, highlighting the contribution of the activities of service. (fig 2) This result was explained to be, in part, due to the adaptation of new homes and businesses related to Covid-19.
In general, it an increase in components of the IMACEC adjusted by season was observed (fig 3)
IMACEC Analysis by activity
Production of Goods
There was a 13.2% increase in production of goods. This can be explained by the combined production increase of 21.8%. A great factor for this was the productivity increase in the construction sector. Another influence was the increase of 18.8% of the manufacturing industry. In contrast, mining went down 0.5%
After adjusting by season, the production of goods increased a 2.0% in relation to the last month. This result was determined by the growth of all the components, highlighting the manufacturing industry.
Commercial activity grew 46.4% propelled by all their components. This result was incidental by the economic measures of support for homes and partial withdrawal of worker retirement plans.
In accordance with previous information, seasonally adjusted numbers show growth of 2.0% in relation to last month.
Services grew 17.8%, mainly explained by the performance of personal services, particularly the health industry and education. Other actors were the results of business services, restaurants, hotels, and transport industry.
After seasonally adjusting these activities, we see and increase of 2.3% in relation to last month. Considering the challenges that the current health crisis has imposed on the recollection of basic data, the Central Bank of Chile, has put extra efforts with their data providers to minimize the impact in the quality of these statistics. However, is relevant to state that the numbers provided might be subject to further review and analysis in comparison to other historic dates. Utilizing this information, the preliminary PIB (GDP) results for the second trimester of the year will be released on August 2021.
In this section, we will analyze the social aspects that might affect the demand for our cooperative.
Population in numbers:
- The total population in Chile is 19,116,209.
- Urban population: 87.7%.
- Rural population: 12.3%.
- Population Density 25 people/km2
- Male Population: 49.5%
- Female Population: 50.7%
- Natural Growth: 0.86%
- Average Age: 32.0
- Ethnic Origins: 89% declared not indigenous. 9% of Mapuche. 1% other indigenous groups (Aimara, Rapanui, Atacameños, Quechuas, Kollas, Diaguitas, Kaweskar, Yaganes)
We can appreciate that the predominant population is between the ages of 25 and 69, followed by 15 to 24 year olds. Concluding that the ideal general objective public is the adult population.
In addition, it is important to mention the efforts from the Chilean government to incentivize technologic disruption and a digital culture among their people. Looking to generate a positive change in the service and business sector by implementing better productivity practices.
It his sector, we utilized the GSMA Intelligence as a source.
The use of web based technologies like internet stores and massive adoption of work-from-home practices are a relevant effect that aid transaction towards transacting with cryptocurrencies. There is a latent need to quickly store, administer, and exchange digital assets and value using mobile technologies and the internet. Yet, banking institutions have monopolize the supply of these services before the inception of Bitcoin.
This presents an opportunity for Tellus Cooperative, to incorporate values of cooperation and mutual aid in a growing technological economy.
Santander Bank in Chile, explains through their market research how consumer behavior and environmental factors are everyday more relevant when choosing a product. It is said that Chile is the most environmentally conscious country in Latin America. Given this, we analyze the impacts that the creation or mining of cryptocurrencies can have in our planet. The implication of great computer power assumes a considerable energetic expenditure. That's why we consider the carbon imprint related to the creation of digital currency, and how there has been some negative externalities impacting the policies enacted by the OCDE to reduce contamination levels.
Taking into consideration that big companies and traditional banking rails need millions on private servers to sustain their customer base, blockchain technology could solve some of these costs by integrating decentralization between user parties. This way dividing the hardware energetic payload that centralize economies perpetuate.
This legal analysis is constituted by sections pondering the legal possibilities of incorporation Tellus Cooperative seamlessly in the Chilean legal system in a secure and transparent manner. We will focus in the legal context surrounding payment systems, which incidentally, has roots on the country's economy and technologic strata. The legal environment is critical to understand the viability of project of such magnitude. As an introduction for this point, we will define a payment system as published in Bulletin 52 by the Central Bank of Chile. " [A payment system]... is an essential component in the economic and financial infrastructure of a country, its functioning allows that transactions are completed in a secure and fast manner, this being a necessary condition for proper market performance, and the economy in general" However, payment systems can also generate risks for their participants, y these develop into issues affecting the economy and the finance sector as a whole.
We have done extensive research on payment systems within the regulatory scope of Chilean legislature, looking to prepare for future obstacles that might present given our business model. The emission and operation of debit, credit, and prepaid cards, are solely regulated by the the Central Bank of Chile.
*Source:Press Release, “El Banco Central de Chile publica nueva normativa sobre emisión y operación de Tarjetas de Pago,
viernes 30 de junio de 2017. Con ocasión de la promulgación de la Ley N°20.950, que autoriza la emisión de tarjetas de
pago con provisión de fondos (prepago) por entidades no bancarias y que encomienda al Banco Central de Chile dictar
las normas aplicables a las empresas que las emitan y operen, esta Institución decidió realizar una revisión integral de
su regulación sobre medios de pago minoristas. Ello, para actualizar y sistematizar la normativa vigente, procurando que
ésta resulte acorde con el desarrollo de mercado y permita velar por la seguridad y eficiencia de estos sistemas de pago.*
The market for payment systems in Chile has been developed mainly for the integration of existen banking systems to connect operational services to commerce conglomerates utilizing these same systems. Incidentally, banks are the owners of the biggest payment gateway service in Chile, Transbank. This model has been recent subject of review, conversation, and recommendations, given the Court of Free Competition's (Tribunal de Libre Competencia TDLC) comments and concerns on diversity of services to offer, geographic coverture, and lack of technological adoption.
The Central Bank of Chile (BCCH) has created regulations to facilitate the incorporation of new economic and financial models to increase the supply for alternative payment systems, and recommends to develop market structures based on (Cardholder, Emitter, Commerce, and Acquirer) as other countries have done in the past.
Additionally, it is required that Service Providers to Merchants (PSC) are willing and able to instate channels, information, or electronic applications to capture, add, and communicate payment operations to an payment system operator to ensure the regulations are taken place. A Service Provider to Merchant (PSC), will be allowed to provide services known to operators (authorization, registry, and payment liquidation) as long as the yearly total to liquidate is under 100,000 UF (~3.5 Million Dollars). If this amount is exceeded, then the Service Provider must constitute itself as an Operator, and regulations would apply. All operators will have to report directly every contract with a PSC to the Superintendence of Banks and Financial Institutions in Chile (SBIF). Yet, there is still a gap to bridge regulating the services associated with these payment systems.
The basic principles that constitute recommendations and/or international standards for the design and functioning of payment systems from a system management perspective and possible legal risks, it is posed that there is a need for proper administration and risk management related to credit and liquidity. It is established then, that payment systems must comply with the ability to liquidate assets in a day to day basis as the bare minimum under the supervision of the Central Bank.
Chilean law establishes the functioning of the financial market and their actors (Cardholder, Emitter, Commerce, and Acquirer), it does not consider other payment methods not supplied by the Central Bank. However, a preliminary report from the Chamber of Commerce of Santiago de Chile (CCS), "The digital Economy in Chile 2016", comments the inevitability of digital forms of money, and explains the advantages and disadvantages of cryptocurrencies like Bitcoin as a universal payment system. As a result, we have seen coverage increase in the media and government initiatives to include these types of technologies in the Chilean economy.
The Unit of Financial Análisis in Chile (UAF) explains that cryptocurrency markets are outside their scope of regulation, given that there is no legal definition for these types of assets, therefore, no entity that has power overseeing it. Currently, companies transacting with blockchain technologies are defined under the market scope of "Money Exchanges" or "Other Entities that Facilitate Foreign Currencies". These are the only aspects of these institutions being regulated, leaving the core functions of a cryptocurrency exchange (being sale a purchase of cryptocurrencies) unregulated and waiting for legislative advances.
Given this, it is probable that Chile will wait for disruptive technologies pushing new regulations and/or wait for initiatives from other countries to analyze the results of their legalization.
Transbank S.A. was founded in 1989 to be the administrator of the Visa credit card. They obtained this license 1990. The institution is owned by seven banks, but 50% is in the hands of the two largest banks in Chile: Santander (25%) and Banco de Chile (26%). Subsequently, Transbank partnered with Tarjetas de Chile S.A. Which held bank the licencing needed to operate the Diner's Club Card in Chile. As a result of this agreement, as well as another signed in 1991 with Bancard, Transbank was given exclusive rights to operate the cards by Mastercard and Magna, thus becoming the only company in Chile to manage and operate credit cards with the role of Sociedad Apoyo al Giro (SAG).
The main roles of Transbank are:
1) Is the only company able to process payments directly in Chile. They use a system called "RedCompra"
2) Is in charge to connect with different commerces and Merchant Service Providers (MSP). They determine their fees based on volume, which negatively affect small businesses.
3) Works as an intermediary with a Point of Sale (POS) system and charges for it.
4) They remunerate affiliate commerces periodically.
5) Serves as a bank intermediary for international actors.
Transbank works with the Fiscalía Nacional Económica (“FNE”) to choose merchant discounts by volume. Then this is reviewed, ammended, ajusted, and approved by the Defense Tribunal of Free Competition ("TDLC").
Founded in 2013, Buda.com (previously SURBTC) has a large market share in the purchase and sale of cryptocurrencies. Buda is the main Bitcoin market in Chile to date. Buda S.p.A and their subsidiaries are not entities regulated by local Chilean authorities, given that Chile still does not have a constitutional definition for what a "Bitcoin" is. Buda has incorporated more than 70,000 new clients since 2017. It is imporant to notice that Buda's model is centralized (CeFi), and the project propelled by Itaú Bank in Chile. As of today, Buda does not transact with Stellar Lumens.
Resources and Relationships
Tellus is constantly developing its partnerships, capacitating its team, and improving its outreach strategy in South America.
- Easy Auto (Automotive Industry) easyauto.cl . It is fully aware of our request for the Stellar fund and maintains exclusive contact with Grupo Easy to incorporate our project in the future. Easy auto is in the process of releasing a new app for the sale and purchased of new, refurbished, and used cars.
- NokServices project, a leading technology company in robotization of operational processes in Chile, established since 2020 with strong connections in digital marketing. Their conviction is to shorten the technological and innovation gap in Latin America. Tellus wants to lead in technological innovation by encouraging the use of the Stellar network. NokServices is a strategic partner in terms of automation operations and flow review.
- Juan Andrés Orrego: Attorney at Law and Legal Representative
- Lazzo Digital Services: Design Studio